Transcript Derek Burleton - TD Bank Financial Group

THE ECONOMIC OUTLOOK
Presentation by
Derek Burleton
Associate Vice President & Senior Economist
TD Economics provides analysis of economic
performance and the implications for investors.
The analysis covers the globe, with emphasis on
Canada, the United States, Europe and Asia.
Contact Information
Phone: 416 982 8065
Email: [email protected]
U.S. ECONOMY TO NARROWLY AVOID RECESSION
U.S. REAL GROSS DOMESTIC PRODUCT
6.0
Annualized quarter/quarter per cent change
Forecast Y/Y % Chg.
(Q4/Q4 % growth)
2007 2.2% (2.5)
2008 1.6% (1.4)
2009 2.2% (2.5)
Potential
growth 2.8%
5.0
4.0
3.0
2.0
1.0
0.0
Q1-06
Q1-07
Q1-08
Q1-09
F: Forecast by TD Economics as at February 2008; Source: Bureau of Economic Analysis/Haver Analytics
U.S. HOUSING DOWNTURN MUCH LIKE THE
OTHERS…
PEAK TO TROUGH MOVEMENTS IN U.S. DETACHED
HOME SALES
0
Per cent change
-10
-20
-30
-40
-50
-60
Existing home sales
-70
New home sales
Housing Starts
-80
1978-1980
1988-1991
Source: U.S. Census Bureau, NAR
2005-2007
…BUT PRICE DECLINES COMING IN STEEPER
PEAK TO TROUGH: U.S. DETACHED EXISTING HOME
PRICES
70
Per cent
Run-up in prices 4 years prior
60
Peak to trough
50
40
30
20
10
0.0
0
-3.4
-10
-7.4
-20
1978-1980
1988-1991
Source: U.S. Census Bureau, NAR
2005-2007
BAD NEWS IS STILL ROLLING IN
U.S. FORECLOSURES
0.9
% started in the month
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
79
81
83
85
87
89
Source: Economy.com, MBA
91
93
95
97
99
01
03
05
07
HOUSING MARKET WOES AFFECTING CONSUMER
BEHAVIOUR
RETAIL SALES AND HOME PRICES
9
Y/Y % change
Y/Y % change
20
16
8
12
7
Home prices, 6 month lead (right
scale)
8
6
4
Core retail sales*
(left scale)
5
0
4
-4
3
-8
05
06
*Retail sales excluding autos and gas
Source: U.S. Census Bureau, NAR
07
08
U.S. EXPORTS OFFER PARTIAL OFFSET TO
HOUSING TROUBLES
CONTRIBUTION TO REAL GDP GROWTH
1.2
Percentage points
1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
Residential Investment
-0.6
Exports
-0.8
04
05
06
07e
08f
Source: BEA; Forecasts by TD Economics (December-07)
09f
WORLD GROWTH TO GEAR DOWN
WORLD GROWTH
Per cent change
Japan
2008
Euro Zone
2007
U.S.
Canada
World
Asian NICs
India
China
0
2
4
6
Forecasts by TD Economics, December 2007
8
10
12
CANADIAN DOLLAR LIKELY TO SLIP, BUT
REMAIN STRONG
CRUDE OIL AND THE CANADIAN DOLLAR
1.05
US$/C$
US$ per barrel
100
90
1.00
80
0.95
70
0.90
Forecast
60
0.85
50
Crude Oil (right scale)
0.80
40
0.75
30
Canadian dollar (left scale)
0.70
20
0.65
10
0.60
0
01-Q1
02-Q1
03-Q1
04-Q1
05-Q1
06-Q1
07-Q1
Source: Haver Analytics; Forecast by TD Economics as at January 2008.
08-Q1F
MANUFACTURING WOES TO CONTINUE…
MANUFACTURING EMPLOYMENT AND THE CDN $
17
US$ per C$
As a share of total employment
Canadian dollar
(right scale)
16
1.7
1.6
1.5
15
1.4
14
1.3
13
1.2
12
1.1
Share of mfg.
sector (left scale)
11
1.0
10
0.9
87
89
91
93
95
97
99
01
03
05
07e
Source: Statistics Canada, FRBNY. F: Forecast by TD Economics as at Dec. 2007.
09f
CANADIAN HOUSING TO LAND SOFTLY
CANADIAN RESALE HOME PRICES
Y/Y % chg., 3-month M.A.
14
14
National
Forecast
12
12
10
10
8
8
6
6
Central & Atlantic
4
4
2
2
0
0
00
01
02
03
04
05
06
07
08
09
Source: CREA / Conf. Board of Canada. Forecast by TD Economics as at Dec. 2007
CANADIAN ECONOMIC GROWTH TO WEAKEN
CANADIAN REAL GDP
6.0
Annualized quarter/quarter per cent change
Potential
growth 2.8%
5.0
4.0
Forecast Y/Y % Chg.
(Q4/Q4 % growth)
2007F 2.5% (2.5)
2008F 1.9% (2.0)
2009F 2.5% (2.6)
3.0
2.0
1.0
0.0
Q1.06
Q1.07
Q1.08
Q1.09
F: Forecast by TD Economics as at December 2007; Source: Statistics Canada/Haver Analytics
WESTERN OUTPERFORMANCE TO NARROW
REAL GDP GROWTH FORECAST 2008
Annual average per cent change in real GDP
3.1
Sask.
2.8
B.C.
2.5
N.B.
2.4
N.S.
Manitoba
2.3
2.0
Alberta
1.9
CANADA
1.7
Québec
1.6
P.E.I.
Ontario
1.5
1.3
N. & L.
0.0
0.5
1.0
1.5
Forecast by TD Economics as at Dec. 2007
2.0
2.5
3.0
3.5
BANK OF CANADA TO CUT LESS THAN FED
BANK OF CANADA RATE AND FED FUNDS RATE
8
%
%
Forecast
7
6
8
7
6
5
Bank of Canada
Overnight
Target Rate
4
5
4
3
3
2
2
1
U.S. Federal
Funds Rate
0
1
0
Jan. 00 Jan. 01 Jan. 02 Jan. 03 Jan. 04 Jan. 05 Jan. 06 Jan. 07 Jan. 08 Jan. 09
Actual data to Jan 22, 2008; Forecast by TD Economics as at January 2008;
Source: Bank of Canada, U.S. Federal Reserve Board.
U.S SUMMARY
• We still view the risk of a protracted U.S.
recession low
– U.S. exports should keep growing
– Federal Reserve aggressive in lowering
interest rates
– Corporate balance sheets, outside financial
sector, in good shape
CANADA SUMMARY
• Canadian economy doesn’t face the
same risks as the United States
• Still, business conditions at home to
become more challenging in 2008
• Autos and other manufacturing exports to
face particularly difficult markets
• As a result, Ontario and Quebec will
remain in the slow lane
CANADA SUMMARY CONT.
• Saskatchewan only provincial economy to
record 3%+ growth in 2008
• Bank of Canada to take out some
insurance by lowering rates
• Growth across the country should
improve moderately in 2009
TD Economics
www.td.com/economics
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